Global Risk Monitor – October 24

Macro Overview - Global markets closed the week with cautious optimism due to softer U.S. inflation data, reviving hopes for synchronized easing among major central banks [1] - Outside the U.S., the economic picture is mixed, with Europe showing tentative momentum, Japan poised for reflation, and China facing domestic softness [1][2] United States - The U.S. economy remains the gravitational center of global finance, with the latest CPI data showing inflation cooling to 3.0%, bolstering expectations for another Fed rate cut [3] - The S&P 500 and Nasdaq reached new record highs, driven by the technology and energy sectors [3] - U.S. consumer behavior remains strong, supported by robust service-sector PMIs and steady employment, despite policy uncertainty [4] - The fiscal trajectory of the U.S. remains a long-term concern, but near-term resilience highlights the adaptability of the economy [5] Europe - The eurozone reported its strongest PMI print since mid-2024, indicating a potential easing of manufacturing drag, with Germany's rebound supporting the bloc [6] - France is an outlier, facing political friction and sluggish domestic demand, while the ECB is expected to maintain its current stance this quarter [6] United Kingdom - Inflation in the UK held steady at 3.8% for a third month, with retail sales unexpectedly rising by 0.5%, reflecting consumer resilience amid declining real wages [7] - Markets anticipate a dovish pivot from the Bank of England by December, which may aid the recovery of sterling-denominated assets [7] Japan - Japanese equities surged due to optimism surrounding the new Prime Minister's pro-growth agenda, with the yen's decline aiding exporters [8] - Inflation remains near 3%, putting pressure on the Bank of Japan to consider a rate hike, likely in early 2026 [8] China - China's Q3 GDP growth of 4.8% masks underlying weaknesses, with retail sales slowing to 3.0% YoY and fixed-asset investment contracting [9] - Industrial production rose by 6.5% due to export strength, but the housing downturn and deflation risk cloud the outlook [9] Emerging Markets - Hungary and Türkiye illustrate divergent trajectories, with Hungary maintaining firm rates to anchor inflation while Türkiye eases despite rising prices [10] - Latin America remains stable, supported by strong terms of trade and disciplined fiscal policies, while EM Asia's central banks prioritize currency stability over growth stimulus [10] Commodities & FX - Oil prices spiked due to renewed geopolitical risks, while gold paused after a nine-week rally [11] - The yen and euro softened against the dollar, reflecting policy divergence, while EM FX remained stable due to capital inflows into local-currency debt [11] Week Ahead - The U.S. FOMC Meeting is expected to result in a near 100% probability of a 25bp rate cut, with market focus on Chair Powell's tone [12] - Key economic indicators such as Consumer Confidence and Durable Goods will provide insights into household and business resilience amid fiscal uncertainty [13] - Global events include the Euro Area GDP Flash and China PMI data, which will be critical for assessing economic recovery [15][16]